Invesco's Zhao Yaoting: Chinese assets have stronger safe-haven attributes, and the risks directly affected by the disruption of Middle Eastern supplies are limited

Invesco Asia-Pacific Global Market Strategist Zhao Yaoting stated that China's GDP growth in the first quarter rebounded significantly to 5% year-on-year from 4.5% in the fourth quarter of last year, mainly driven by trade, with total goods trade reaching a record high for the same period. The strong trade performance was not due to early shipments of exports, as imports also rose significantly, indicating a substantial improvement in production performance and sustained demand for Chinese products in the market.

At the same time, China's "new economy" sector remains robust, with high-tech and green manufacturing continuing to outperform. Since the beginning of this year, industrial production has grown by 6.1% year-on-year, helping to offset the relatively weak impact of domestic demand. Retail sales grew by 1.7% year-on-year in March.

China's Producer Price Index (PPI) turned positive in March, ending 41 consecutive months of deflation, reflecting cyclical favorable factors and the initial effects of "anti-involution" policies. This should be seen as the beginning of a gradual normalization of prices, rather than the start of a new round of strong inflation. Price stabilization is expected to improve corporate profit margins and profitability, thereby boosting private investment confidence. With more anti-involution policies gradually being implemented, the market may currently be in the initial stage of a long-awaited virtuous cycle.

Chinese assets are increasingly viewed as having safe-haven attributes. Since the outbreak of the conflict in the Middle East, the decline in the Chinese stock market has been much lower than that of other major global markets, while the RMB exchange rate and government bond yields have remained relatively stable. Additionally, the Chinese stock and bond markets have shown a positive correlation for the first time in two years, reflecting an inflow of risk-averse capital.

China faces limited risks directly from supply disruptions in the Middle East, and the Chinese market has strong policy buffering capabilities. Therefore, two sectors are expected to benefit from this economic resilience: the first is the energy, resources, and upstream industrial sector, including oil and gas services, industrial metals, and raw materials, where Chinese companies are expected to play a hedging role amid geopolitical fluctuations; the second is China's technology, high-end manufacturing, and export-related industries.

Zhao Yaoting believes that the strengthening of the RMB signals macroeconomic and policy stability, which helps attract foreign capital into the Chinese stock and bond markets. Attractive stock market valuations, combined with stable currency, provide global investors with a compelling potential for comprehensive returns